The cost of goods In Nigeria is set to rise further as manufacturers brace for a fresh wave of increases in production expenses, driven by soaring energy prices and escalating input costs.

The development compounds existing pressures on the sector, which is already grappling with a severe cost shock. Data from their annual reports show that 17 of the largest listed companies on the Nigerian Exchange (NGX) recorded a combined ₦7.59 trillion in input costs for the 2025 financial year, representing a 15.2 percent increase compared to the previous year.

This figure is already getting higher.

Analysts describe the situation as a “double whammy” — a simultaneous impact of rising energy costs and weakening consumer purchasing power — triggered by global oil market disruptions linked to geopolitical tensions involving the United States, Israel, and Iran.

Manufacturers are particularly exposed to the surge in energy prices, especially diesel, which serves as the primary alternative to Nigeria’s unreliable electricity grid. Disruptions in the Strait of Hormuz — a critical channel for nearly 20 per cent of global oil supply — have heightened concerns that crude oil prices could climb to as high as $150 per barrel in the near term.

The domestic impact has been swift. Depot prices of Automotive Gas Oil (diesel) have surged to about ₦1,700 per litre across major supply hubs following recent price adjustments by local refiners. This sharp increase has significantly raised operating costs for factories dependent on diesel-powered generators.

Industry operators say the development is exacerbating long-standing structural challenges.

Managing Director of Coleman Technical Industries Ltd, Mr George Onafowakan, noted that unreliable grid electricity has forced manufacturers to internalise the cost of power generation.

“No factory in Nigeria is built without factoring in alternative power. Manufacturers have effectively become their own electricity providers,” he said, adding that energy now accounts for a substantial share of total production costs.

Across key industrial clusters, factories are increasingly reliant on continuous diesel supply to sustain operations, with technical teams working round the clock to manage fuel consumption and prevent costly disruptions to production lines.

Energy-intensive sectors such as cement and brewing are among the hardest hit. Industry estimates indicate that major cement producers now incur combined energy costs exceeding ₦1.1 trillion, forcing firms to either absorb rising expenses or pass them on to consumers.

BUA Cement remains particularly vulnerable, with energy accounting for about 42 percent of its cost of goods sold. Dangote Cement, despite strong cash flows, continues to face significant exposure to energy price volatility, which historically constitutes around 40 per cent of its production costs. Lafarge Africa is, however, accelerating alternative energy initiatives, including waste-to-energy solutions and compressed natural gas (CNG) logistics, to reduce reliance on diesel.

In the brewing segment, Nigerian Breweries has announced an upward review of its product prices effective March 20, citing prevailing economic conditions and rising operational costs. The adjustment affects major brands such as Star Lager, Gulder, Heineken, Legend Stout, and Maltina.

Analysts warn that while higher global oil prices may boost government revenues and foreign exchange reserves, they effectively act as an implicit tax on the domestic manufacturing sector. Rising diesel costs are expected to trigger an inflationary ripple effect, increasing transportation and logistics expenses across supply chains.

This comes amid weak consumer purchasing power, raising concerns about a potential decline in demand. Experts caution that continued price increases could lead to reduced sales volumes in the second half of 2026.

Data from the National Bureau of Statistics show that manufacturing contributed 8.05 percent to Nigeria’s real GDP in 2025, down from 8.24 percent in 2024, highlighting the sector’s fragile position. Meanwhile, the Nigerian Economic Summit Group’s Business Confidence Monitor points to declining business performance, reflecting mounting pressure from rising costs and structural inefficiencies.

As global energy uncertainties persist, stakeholders warn that without urgent policy intervention, Nigeria’s manufacturing sector could face deeper strain despite potential gains from higher oil revenues. (Nigerian Tribune)

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